As we previously reported in our Employment Law Spotlight Blog, on April 1, the Wage and Hour Division of the U.S. Department of Labor (DOL) proposed a new, four-part test for determining "joint employment" under the Fair Labor Standards Act (FLSA). According to the DOL, the proposed four-part balancing test is slated to eliminate any circuit splits over the issue and is supposed to make joint employer analysis "simple, clear-cut, and easy to apply." The test considers whether the potential joint employer actually exercises the power to:

  1. Hire or fire the employee.
  2. Supervise and control the employee's work schedules or conditions of employment.
  3. Determine the employee's rate and method of payment.
  4. Maintain the employee's employment records.

The reserved right to do these things would not be relevant to a company's status as a joint employer. To be a joint employer, it must actually do them.

The DOL would permit other factors to be considered in the joint employment analysis, but only if they tend to show whether the potential joint employer is exercising significant control over the terms and conditions of the employee's work, or otherwise acting directly or indirectly in the interest of the employer in relation to the employee.

The new rule would clarify that certain business practices are also not suggestive of joint employment. For example, none of these activities would make a finding of joint employment more likely:

  • Providing a sample employee handbook to a franchisee.
  • Participating in or sponsoring an association health or retirement plan.
  • Allowing an employer to operate a facility on one's premises.
  • Jointly participating with an employer in an apprenticeship program.

The new rule would provide that certain types of business agreements are not indicative of joint employment. For example, requiring an employer to institute workplace safety measures, wage floors, sexual harassment policies, morality clauses, or requirements to comply with the law or promote other desired business practices would not be evidence in favor of joint employment.

On May 13, the DOL announced that the comment period originally set to end on June 10 has been extended until June 25. Based on the comments, the DOL could decide to modify the proposed rule, rewrite it or scrap it entirely. We will keep our eyes and ears open to see what happens!